What Americans can analyze from Denmark on coping with debt ceiling crisis


The high-wire drama of elevating the US debt ceiling is making headlines again. Is there a better way? Perhaps Denmark has the answer.

The US Congress is as soon as extra arguing about the country's debt ceiling - the restriction on how a great deal the authorities can borrow.

If the two foremost events do not agree on lifting the cap in the subsequent few weeks, the US may want to for the first time in records default on its debt.

A default would ship shockwaves thru international monetary markets and ought to be disastrous for the US economy, specialists believe.

But Republicans, who manage the decrease chamber of Congress, prefer spending cuts earlier than they will agree.

The ceiling used to be added greater than a century ago and it makes the US some thing of an outlier in international terms.

Only one different industrialised country - Denmark - has a formal debt ceiling, however it is dealt with besides the drama and brinkmanship frequently viewed in Washington.

In fact, the Danes' debt ceiling is not often ever talked about, due to the fact it is by no means even come shut to being broken.

Called "gældsloft" in Danish, it was once brought in 1993 as a constitutional requirement.

"It's there so that the authorities can't simply write a clean cheque," stated Las Olsen, chief economist at Danske Bank.

Though the American and Danish legal guidelines show up similar, they work alternatively differently.

"[Danish] politicians reflect onconsideration on it to be extra of a formality. It's no longer a political issue," Mr Olsen said.

"They [parliament] have already surpassed all the legal guidelines requiring spending and they have additionally exceeded the legal guidelines about how tons tax to collect," he added.

"So it would be a little bizarre now not to enable the authorities to borrow the difference."

The Danish threshold is set at DKK two trillion ($284bn, £237.7bn). For a small united states this is tremendously high, and capability there is scope to take out nation loans except persistently hitting it.

"The complete stage of kingdom debt at this factor is DKK 645 billion. So it is a lengthy way off," stated Mr Olsen.

The ceiling has solely been lifted once, when it used to be doubled in 2010. This observed the 2008 economic disaster and the pass used to be extensively backed by using Danish political parties.

"All of a surprising the authorities honestly did have to borrow a lot of cash in a quick duration of time to help the economy," stated Mr Olsen.

In comparison, the American ceiling has been raised on seventy eight separate activities considering the fact that 1960 - forty nine instances beneath a Republican president and 29 instances below a Democrat. 

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